Ferro Alloy Resources Pushing Ahead With Feasibility Study, Despite Coronavirus Disruption

Ferro Alloy Resources Ltd (LON:FAR) has been able to keep ore processing operations going at its Balasausqandiq vanadium project during the period of the ongoing coronavirus crisis, albeit at a slower pace.

“The company is ticking along,” says chief executive Nick Bridgen.

“We have no cases in the workforce, but because of our two weeks on/two weeks off rota we do have trouble bringing people back to site. So we’re operating with reduced management and only the local staff can come and go.”

Accordingly, the company released an update at the beginning of May showing a significant percentage increase in quarter-on-quarter vanadium pentoxide production, and an even larger increase in shipments.

The rise follows the completion of the first stage of a planned expansion programme, although Ferro Alloy has yet to make full use of the increased capacity as the connection to the electricity grid has been delayed due to the coronavirus.

Bridgen has every hope that restrictions will be lifted sooner rather than later, although as elsewhere in the world the precise timing remains anyone’s guess.

In the meantime though, the vanadium price has ticked up somewhat, in response to a supply squeeze relating to shuttered South African production. That’s been nice for the company after more than a year of falling prices, and bodes well for the valuations that might be placed on Balasausqandiq once the ongoing full feasibility study on the project is completed.

The current production, after all, while useful in helping the company pay its way, remains small scale. It’s the bigger potential of a full-sized operation at Balasausqandiq that Bridgen is really interested in.

“The game now is to get our feasibility study done as soon as possible,” he says.

And he’s not underplaying the returns he’s expecting Balasausqandiq to be able to generate. Not in the slightest.

“This is probably the best mining project there’s ever been in terms of margins and costs,” he says.

“The NPV is US$2bn, and there’s a huge ocean of profitability to be unlocked.”

The optimism is grounded in the unusual nature of the ore in which the vanadium at Balasausqandiq is contained. Unlike most other vanadium projects around the world, which are hosted by vanadiferous titano-magnetites, the ore here is carbonaceous. That makes it much easier to process, and potentially much more profitable.

And although it remains to be seen what numbers the feasibility study will throw out, the company is already a long way on from mere desktop modelling. Ferro Alloy ran a pilot plant for year processing Balasausqandiq ore, the same plant that has now been upgraded to take third party material.

“That helped optimise the process,” says Bridgen.

“Now we want to repeat ad nauseam and check that nothing happens in the solutions that we didn’t pick up in the pilot plant. And we are pressing ahead with all the design specs for the process plant. It’s only the field work that we can’t really start on.”

Not that any more exploration is necessary. The project is already known to contain a reserve of over 70mln tonnes under the Russian resource classification system. All that needs to be done now is geotechnical work. But for the time being it will have to wait.

Much else is in place, though, as Bridgen explains.

“We have a 15,000 tonne a year pilot plant, and we’ve had actual production. We’ve sold several batches that we’ve made into China. And we’re already mining 15,000 tonnes per year as part of our licence commitment. We’ve been on the ground for years now, we’ve got labs and managers and everything we need to develop a project.”